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2011•Munich Personal RePEc Archive (Ludwig Maximilian University of Munich)Open access

Time Preference and Interest Rate in a dynamic general Equilibrium Model

Gaowang Wang

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Abstract

This paper reexamines the relationship between the time preference rate and the real interest rate in the neoclassical growth model by introducing Keynesian time preference. It is shown that the long-run behavior of the neoclassical growth model persists. When introduucing money by money-in-utility, money is superneutral and the optimal monetary policy is the Friedman rule.

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This paper reexamines the relationship between the time preference rate and the real interest rate in the neoclassical growth model by introducing Keynesian time preference. It is shown that the long-run behavior of the neoclassical growth model persists. When introduucing money by money-in-utility, money is superneutral and the optimal monetary policy is the Friedman rule.

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Available abstract

This paper reexamines the relationship between the time preference rate and the real interest rate in the neoclassical growth model by introducing Keynesian time preference. It is shown that the long-run behavior of the neoclassical growth model persists. When introduucing money by money-in-utility, money is superneutral and the optimal monetary policy is the Friedman rule.

Key concepts: Economics, Time preference, Preference, Interest rate, Keynesian economics, New Keynesian economics, Growth model, Monetary policy

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